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ANOTHER WAY TO LOOK AT PROPERTY

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Written by Melanie Toye, January 27, 2014

Business owners know the cost of leasing a building. In some cases, leasing a building is double to triple the cost of the mortgage held by the building's owner. 

There is seen to be a growing demand for large sheds (for manufacturing businesses and the like) and retail hot spots, to meet the growing fluctuation of smaller region's citites that are becoming more enticing to live in. Investors are finding a more lucrative way to invest in property rather than investing in residential property.

Take this example, Billy is approved a loan for $200,000 to purchase a two-story 200m2 building. Billy then leases out his property for $20,000 a year. His mortgage is at 5% interest rate and pays $14,000 a year in repayments. He profits $6,000 in positive-geared income a year. Billy puts aside $2,000 a year towards a maintenance budget. After a couple of years, Billy has the option to use his profit to pay a lump sum into the mortgage or he might even consider using that saved income as a down-payment for another investment. 

For those who already have a mortgage for their first home, simply buying another residential property for an investment can add another high mortgage to your name. However the rent may not be enough to cover your mortgage repayments. Buying a warehouse in a high-growth suburb could really add to a portfolio.

The advantages of leasing to a business is businesses tend to stay in a property longer than someone renting a residential property. As businesses know once they find a location, when they move they could lose a small percentage of their customers who shop their occasionally if they are not aware of them moving out of their new location. Meaning less costs for advertising etc. 

The main advantage from residential to business space is there is perceived to be less risk with business owners managing your property than people renting to live in the property. 

If you are seeking an investment property to hold onto for awhile, than this might be an option to consider. 

Speak further with our Mortgage Managers on 1300 799 266 or email: This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it.